First Home Saver Account

Let’s understand how the FHSA work:

·         The scheme of FHSA was launched as per the promises made by Prime Minister Rudd during his 2007 campaigning speech to provide simple tax saving schemes and government assistance so as to encourage individuals to start saving for their own homes.

·         This scheme is applicable for all the Australian tax payers between the age group of 18 to 65 years of age who already don’t have a property in their name. There can be only one First House Saver Account per individual and deposits into this account can be made only from after-tax income. Remember FHSA can only be opened using an individuals name and joint accounts cannot be opened.

·         Before opting for any balance withdrawal for making a house purchase, an individual has to make deposits of $1000 for four financial years. Any withdrawal that is made towards purchasing your first home will be exempted from any kinds of taxes.

·         The funds for the FHSA can be contributed by the account holder and even by other parties like friends, families or employers. The government contribution will be directly paid into the individuals’ account after they have filed their tax returns and provided all relevant details to the ATO. For every first $5000 deposits made by the individual in FHSA, they will receive an additional government contribution of 17%.

·         As per the rulings of 2008-2009 an individual can maintain a maximum balance of $75,000 in their FHSA and the amount over this value will be returned to the individuals.

·         A lump some withdrawal has to be made from the FHSA account to purchase the house and it is essential for the individuals to reside in their first house for at least 6 months in the first year of its purchase.

·         Incase the individual doesn’t want to purchase the house using the savings of FHSA; they need to transfer the fund to superannuation and close the account. Individuals will have to incur high penalties if the money withdrawn is used for purposes other then first home purchase. Government contribution towards FHSA will stop in case the individual moves abroad, though the account holder can continue making contributions.

The primary aim of FHSA is to help the individuals realize the dream of possessing their very own home and bring about an increase in housing affordability in Australia.